Constellation Development, LLC v. Western Trust Co.
2016 ND 141
| N.D. | 2016Background
- In Sept. 2013 Constellation agreed in writing to buy ~24 acres from Western and a handwritten, initialed notation modified a printed provision to state “This has changed to a three-year purchase option to run concurrently” and included a labeled “First Right of Refusal” on an additional ~62 acres at $18,000/acre.
- In Aug.–Sept. 2014 Constellation purportedly exercised the option and signed a Sept. 5, 2014 purchase agreement for ~63.944 acres at $18,000/acre, with a $2,500 nonrefundable payment due at execution and the balance due by Oct. 13, 2014 (closing tied to a 1031 exchange).
- Constellation’s two $2,500 checks were returned for insufficient funds; Constellation alleges it later offered a cashier’s check which Western refused.
- On Oct. 9, 2014 Western sent a Notice of Termination demanding full payment by Oct. 13 and stating it would begin selling to others; Constellation did not pay the balance by Oct. 13.
- Western contracted to sell the 64 acres to Dabbert at $19,000/acre on Oct. 29, 2014 and conveyed in Dec. 2014.
- Constellation sued for breach of contract and equitable/promissory estoppel (against Western) and tortious interference (against Dabbert); the district court granted summary judgment for defendants. The Supreme Court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Western breached by refusing to sell the 63.944 acres after the Sept. 2014 agreement | Pralle/Constellation: the Sept. 2014 agreement was validly formed when option exercised; Western’s refusal and refusal to accept cashier’s check breached | Western: the Sept. 2014 agreement required $2,500 nonrefundable at execution and full payment by Oct. 13; payments were not made, so no enforceable contract | Court: No breach as a matter of law—payment terms not satisfied, option/right did not obligate sale |
| Nature/effect of the handwritten modification and right-of-first-refusal: whether Constellation retained a triggered right to match Dabbert’s purchase | Constellation: handwritten language created a separate purchase option and preserved a right of first refusal that Western violated by selling to Dabbert without providing terms | Western/Dabbert: the handwritten language merely created/changed an option or a right of first offer; the contract’s substance did not give a triggered right of first refusal requiring notice of third-party terms | Court: Even if both option and right existed, the provision read as a first-offer style right; Western’s notice of intent to sell triggered Constellation’s opportunity, which it did not accept—no enforceable right obstructed sale |
| Whether an oral extension (estoppel/execution) modified the written Sept. 2014 agreement to excuse late payment | Constellation: Hoffman orally promised extensions and assurances that closing could occur later; equitable/promissory estoppel or part performance should allow enforcement of oral modification | Western: any modification of a written land sale must be written or an executed oral agreement under N.D.C.C. § 9-09-06; no written or executed oral modification exists | Court: Affirmed dismissal—North Dakota requires written or executed oral modifications for real estate contracts; unexecuted oral promises cannot modify a statute-of-frauds-covered land sale by estoppel |
| Tortious interference against Dabbert | Constellation: Dabbert induced Western’s sale despite Constellation’s rights | Dabbert: there was no breach or enforceable right to interfere with; sale was valid | Court: Tort claim fails because no underlying breach/right existed to be impaired |
Key Cases Cited
- Estate of Grengs v. Estate of Grengs, 864 N.W.2d 424 (N.D. 2015) (distinguishes option vs. right of first refusal and explains triggering mechanics)
- Hamilton v. Woll, 823 N.W.2d 754 (N.D. 2012) (summary judgment standard)
- Northern Plains Alliance, L.L.C. v. Mitzel, 663 N.W.2d 169 (N.D. 2003) (describes how a right of first refusal is contingent on owner receiving and accepting a third-party offer)
- Estate of Zubicki v. Rutherford, 537 N.W.2d 559 (N.D. 1995) (substance controls over labels in contract interpretation)
- Cughan v. Larson, 100 N.W. 1088 (N.D. 1904) (strict construction of statute requiring written alteration of contracts for real estate)
- Valentina Williston, LLC v. Gadeco, LLC, 878 N.W.2d 397 (N.D. 2016) (application of N.D.C.C. § 9-09-06 regarding modification of written contracts)